What can be done to make the environment for upstream activity more attractive?
MARTIN MBOGO: I don’t see this as being any different than making the overall investment climate more attractive. Respecting the sanctity of contracts is crucial. In the case of natural resources, you start off with nothing and then when something comes along the interest levels and appetite go up exponentially.
Extraction is a long-term business, so one of the fundamental pillars we seek from governments is active application of the law. We’ve secured this with goodwill from the Kenyan government. Many current agreements cover only a fraction of the issues that can arise across the oil and gas landscape. Constant dialogue and a platform for discussing these issues are thus essential. There are a number of relevant bills in circulation at the moment, including the Energy Bill, the Natural Resources Bill, and the Community Land Bill. At some point you have to face some of the issues in order to lead into the others.
While a regulatory framework is crucial, the next most critical factor is management of expectations. Whenever there is a discovery the next question is always, “Why are you not producing?” Yet before that happens, we need to educate and forecast how many jobs will be created, what this means for the local pastoralists and how infrastructure will be affected. This is a big chunk of the work to be done.
How well surveyed is Kenya’s geology at present, and how can technology improve this?
MBOGO: You can only answer that question relative to other jurisdictions. At any new frontier, there is always little data available. However, the good news is that work that was done 10-20 years ago can now be analysed with new technologies and provide new insights. The short answer here is that the technology part of this business is not the greatest challenge; this can be surmounted with competent engineers and geologists. The real issues are above ground.
What strategies are in place to incorporate local communities into the industry in preparation for commercial oil and gas production?
MBOGO: This will be a journey, but we are off to a very good start. At the moment, a good 60% of our workforce comes from the areas in which we operate. This doesn’t just mean Turkana; we are present in the western part of the country as well. In November 2013, this figure was around 47%, so that is a significant increase in a short period of time.
The thing to realise is that most of these employees are actually sub-contracted. The way to get the local content agenda up to speed is to decide upon the right contracts from the beginning, so that while we monitor these contracts we can embed local content. If you take on an inexperienced hire, then, depending on the tenure of the contract, there will be a motive to upgrade the skills of that individual so that six months on they are more valuable. It is still very early in the discovery process and the challenges are significant, but this is normal in places that have never had oil and gas production.
A few studies have been done and the Ministry of Energy understands the skills gap and the challenges in building institutional capacity. Everyone involved in oil and gas has very limited capability in this regard, but through institutions like the World Bank we are seeing the right components and coming together to make business thrive. There is certainly more to do than has already been done.
In one initiative, we are pursuing specific skills sets for oil and gas through a scholarship scheme that has sent more than 20 post-graduates to study oil and gas specifically in the UK. Many of these graduates we have absorbed into our system. Everyone needs to understand that we are at an exploration and appraisal phase. Development and production is a long-term proposition and so we must work with stakeholders to build understanding and knowledge about what activities must take place at each stage.
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